FID II environment might play out,
mid-sized deals that are too large
for the lit market and dark MTFs,
and too small for the large-in-scale
waiver, appear to be under the
“Lit books tend to be full of
€ 10,000 trades, dark MTFs more
like € 10,000-30,000 and then the
big block trading will be €1 million
plus. The real issue is going to be
those trades in the middle, which
would have been traded on the
BCNs in the past. That BCN flow
will now have to find various other
homes” says Hemsley.
One answer is that such trades
will get aggregated into a larger
order that fits the large-in-scale
threshold, he explains, while others may get split up to be worked
on the lit market or dark MTFs.
Hemsley believes new initiatives,
such as its own periodic auctions,
will also help to meet some of this
demand for mid-sized trading
“We think our periodic auctions
will hit the sweet spot between the
smaller trades on the continuous
markets and the larger, negotiated
block deals,” he adds.
Bats launched its periodic
auctions back in October 2015 to
counteract declining order sizes.
Auction events take place throughout the day and have a random
end time which will allocate trades
based on price and size rather than
time, provided the matches are
within the European Best Bid and
Offer price range.
“It’s important for the buy-side
that they can choose how they
want to trade,” Hemsley says, “You
decide the urgency and the prior-
ity, we don’t want to jam everyone
into one place.”
Choice appears to be something the buy-side will
have in abundance post-MiFID, as Bats and its com-
petitors scramble to push out an ever broader range of
block trading, auctions and new order types in order to
adapt to the new regulatory order.
There is no doubt 2017 is going to be a huge year for
CBOE and Bats, transforming them into true global
and multi-asset players. Bringing the two very different companies together in a way that can produce
greater growth will be a challenge, as will adapting
to the rapid changes in regulation being seen not just
in Europe but across the world. Hemsley is confident
the firm has already got in place many of the answers
investors are seeking, but it will also face issues including Brexit, a possible rollback of regulation in the
US and an increasingly volatile political situation in
many of the countries in which it operates.
Prior to joining BATS, Mark Hemsley served
as MD and CIO at LIFE, charged with
increasing exchange business revenue. His
involvement in the global technology sector
includes the CIO role at Deutsche Bank GCI
and VP of Credit Suisse First Boston.
At BATS Hemsley became firm’s first
employee to take them into Europe along
with negotiating the deal to amalgamate
BATS with Chi-X Europe in November 2011.
Since the acquisition by CBOE, Hermsley has
become president of CBOE Europe with the
goal of integrating the two firms and further
growing their European presence.
“Volume caps will compromise dark MTFs and it
is evident that a large number of stock will be
going straight over the 8% total volume cap in
January next year.”